Soda Taxes Gain Weight with Congress

Soda taxes may help trim budget deficits, but will they really help trim waistlines? These taxes are being considered across municipalities, states and even Congress, but there isn’t much evidence that it will reduce the incidence of obesity in the U.S. Yet the idea is catching on across the country as governing bodies scramble to generate more revenue.

There’s little doubt that Americans are big soda guzzlers. The average American consumes 50 gallons of soda and other sugar-sweetened beverages per year. The big three soda companies (Coca Cola, Pepsi, Dr. Pepper/7 Up) produce around 450 different types of soft drinks. There are 17 teaspoons of sugar in a 20-ounce bottle of soda, and average bottle size has increased 149% since the 1950s.

Sugared beverages are the No. 1 source of calories in the American diet, representing 7% of the average person’s caloric intake and as much as 10% for children and teens.

This year, at least 20 cities and states have proposed new taxes or the removal of tax exemptions on non-alcoholic beverages. Washington state was the first to impose a new excise tax on sodas - 2 cents per 12 ounces. The mayor of Philadelphia wants to one-up Washington and impose a 2-cents-per-ounce tariff amounting to a 24 cents per 12-ounce can tax on most sweetened drinks. Colorado has repealed its excise tax exemption for carbonated beverages, effectively raising prices to consumers.

Not to be outdone, the federal government is angling for its share of the tax loot. Originally proposed as part of Obamacare and later dropped from the final bill, soda taxes are again being considered to help close growing budget deficits. New taxes, fees and fines already earmarked to offset the cost of Obamacare only account for about half the $1.2 trillion price tag (not including an additional $250 million for the expected Medicare “doctor fix”). Can federal soda taxes be far behind?

Congress is being aided in its effort to spread beverage excise taxes by the Washington, D.C.-based Center for Science in the Public Interest. This national advocacy group plans to propose a federal excise tax not just on sodas, but also on fruit drinks, energy drinks, sports drinks, and ready-to-drink teas.

The Congressional Budget Office estimates that a 3-cents-per-12-ounce excise tax would generate $24 billion in additional tax revenue over four years. Excise taxes are levied on companies for goods they produce and are typically passed along to consumers.

The beverage industry isn’t taking this lying down; they’re fighting back hard to try and block the new taxes and repeal the excise tax just passed in Washington state. Industry trade groups point out that the tax is mostly about a money grab to close budget deficits and pump more revenue into government coffers.

They also point out that the taxes would hit consumer pocketbooks during a period of high unemployment and lead to lost jobs for bottlers and distributors. In an attempt to counter the soda tax movement, the American Beverage Association stepped up its spending on lobbying to $18.9 million in 2009 from $668,000 in 2008.

What’s often lost in the midst of the current debate is whether the soda tax will actually have an effect on the rate of obesity. Consumer and public health advocacy groups would have us believe that the science is settled. They cite studies that link obesity, at least in part, to the consumption of sweetened carbonated beverages.

One study out of UCLA conducted in 2005 and involving 4,000 adolescents and 43,000 adults said it established a clear link between soda consumption and obesity. They noted that 41% of California children, 62% of adolescents and 24% of adults drink at least one sugar-sweetened beverage per day. Adults in this category were 27% more likely to be overweight.

The link may have been established, but this hardly proves cause and effect. Remember, consumption of diet sodas also correlates with obesity. A University of Texas study demonstrated a stronger link between obesity and diet soda consumption than drinking regular, full-calorie soda.

And what’s to say that restriction of one type of beverage may simply lead to substitution with other types of high-calorie foods that may be high in fat content. Has the elimination of soda and snack machines on high school campuses led to a measureable reduction in obesity? It has certainly reduced school revenues, but the effect on obesity is unknown.

Taxing sodas will probably lead to a drop in soda consumption, fewer jobs in the beverage industry and less tax revenue than our legislatures will project. In addition to disappointing revenue, it’s far from certain that beverage taxes will reduce the incidence of obesity in Americans. Under what currently passes for logic in our legislatures, the soda tax sounds irresistible.